Financial Crisis: Iceland's banking meltdown threatens British jobs

Hundreds of British jobs are under threat after the Kaupthing, Singer and
Friedlander, the UK division of Iceland's largest bank, was put into
administration.

Iceland's banking meltdown threatens British jobsPhoto: GETTY

By Rowena Mason in Reykjavik

12:16AM BST 09 Oct 2008

The UK Treasury said the action had been taken to protect the retail deposits in the Kaupthing unit, after the Financial Services Authority determined it was unlikely to be able to meet its obligations to depositors. Icelandic Prime Minister Geir Haarde last night refused to rule out the seizure of Kaupthing, saying it was "unlikely" but possible. This would put almost the entire Icelandic banking system under state control.

The collapse of Kaupthing Singer and Friedlander puts the jobs of 770 workers in the City, the Isle of Man, Surrey, Glasgow and Birmingham at risk, unless administrators can find a buyer.

The move comes after Britain's largest internet bank, ING Direct, signed an agreement with the Treasury to take over more than £3bn of deposits held by British savers with Icelandic-owned banks. ING said it had acquired £2.5bn of deposits and 160,000 customers from Kaupthing Edge, the UK retail arm and internet-only arm of Kaupthing. It is also acquiring £538m of savings held by 22,200 people with Heritable Bank, whose parent company, Landsbanki, was placed in receivership yesterday.

Earlier yesterday, the British Government stepped in to guarantee the deposits of customers of Icesave, the online savings bank which collapsed after Landsbanki was nationalised. Prime Minister Gordon Brown has threatened to sue Iceland on behalf of 300,000 UK customers.

The Icelandic financial regulator has now abandoned attempts to revive the Icelandic currency by pegging it at 131 krona to the euro. As the country slipped further into financial meltdown, the government abandoned its decision to buy 75pc of Glitnir bank. It will instead put it straight into receivership.